At some point during your restaurant’s digital ordering journey, you might find yourself asking, how is a payment processor different from a payment gateway? If not, you likely will, and you have come to the right place for answers.
In the world of digital commerce, both payment processors and gateways serve a vital function in the digital ordering ecosystem as it pertains to how electronic payments are collected, securely processed, validated, and funded.
Understanding the People Involved in the Process?
- Customer. The individual who purchases goods and services.
- Merchant. The actual business that acquires funds in exchange for goods and services provided.
- Issuing Bank. The financial institution that issued the customer’s payment card (i.e., credit card, debit card, etc.).
- Acquiring Bank. The banking organization that issued the merchant account to the business establishment, allowing the merchant to receive funds in exchange for goods and services.
What is a Payment Processor?
A payment processor is an entity that helps businesses (i.e., restaurants, hotels, etc.) set up a merchant account with a merchant service provider that allows the business to accept card-based payments.
When a customer makes a purchase with the desired payment card (i.e., credit card, debit card, etc.), the payment processor takes the credit card information entered and passes it along to the credit card network, who performs an available balance inquiry against the customer’s bank to ensure the customer has the proper funds available.
The payment processor then passes along the approval status that is returned from the credit card network back to the merchant of business. Upon approval, the payment processor notifies the credit card network to collect the amount due for the transaction from the customer’s issuing bank. After which, the funds are deposited into the merchant’s acquiring bank.
To help summarize, a payment processor is simply the magical link that connects the merchant’s bank with the customer’s bank.
What is a Payment Gateway?
How does a business process electronic payments securely? Using a payment gateway. A payment gateway is a specialized piece of software that facilitates the electronic process of payments. It is also used to authorize transactions between a business and its customers. These transactions can take the form of an in-store purchase at a physical Point-of-Sales (POS) terminal, or online by virtue of a digital ordering system.
Which One Do I Use for Digital Ordering?
As noted by some of the great minds in our generation, including Frank Vincent Zappa, an American composer, musician, and film director, “One size does not fit all.”
The same can be said about sourcing for the right payment processor and payment gateway for your restaurant’s digital ordering system and yes, you need both.
The answer is simple, choose the one that is:
- Secure. Select a payment provider that offers the most secure protection for your business and customers.
- Cost-Sensitive. Select a payment provider who is willing to work with you that offers reasonable and affordable rates.
- Chargeback Protection. Select a payment provider that safeguards your business and digital ordering program from fraudulent chargeback claims that may impact your online ordering sales bottom-line.
- Customer Service. Select a payment provider who cares about your business and delivers exceptional customer service.
- All-In-One. Select an inclusive payment provider that offers the convenience of serving as both a payment processor and payment gateway.